THE INCORPORATED OWNERS OF FARADAY HOUSE v. SHINE WHEEL LTD

LDBM 95/2015

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

BUILDING MANAGEMENT APPLICATION NO 95 OF 2015

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J U D G M E N T

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Undisputed or Indisputable Facts

1.  The applicant is the Incorporated Owners of Faraday House ("IO").  The respondent is the owner of a residential unit as well as Car Parking Space No. 48 ("CP 48") and No. 49 ("CP 49) on the ground floor of Faraday House ("the Building").

2.  The Building was built in or about 1991 of which Memoran Company Limited ("Memoran") was the developer.  By the Deed of Mutual Covenant dated 26 November 1991 ("DMC"), Parkfair Management Limited ("Parkfair") was being appointed as the Manager of the Building.  Parkfair was replaced by Sino Estates Management Limited ("Sino") in about 1996 after the incorporation of the IO in 1996.

3.  In about early 1992, Ms Pang, a director of the respondent ("Pang") negotiated with a Mr Yiu Ho Wing ("Yiu") of Chung Tung Investment Limited (“Chung Tung”) which was the agent of Memoran for the purchase of a residential flat with car parking spaces in the Building.

4.  Pang asked for a unit with 3 car parking spaces but declined car parking spaces 66-68 offered by Yiu since they were on a slope.  Yiu then asked Pang to consider CP 48 and CP 49 together with the adjacent space next to CP 48 ("Adjacent Space") which has sufficient space for parking another vehicle.  Yiu told Pang that the Adjacent Space was not designated to be a car park at that time but he would arrange for Memoran to expressly acknowledge the respondent's right to use the same for private car parking purposes ("the Representation").  Pang was given to understand that the price for 2 car parking spaces was around $250,000 and the Adjacent Space would be around $50,000.  Pang agreed.

5.  By the assignment dated 13 April 1992 (B/159-170), the respondent acquired from Memoran a residential unit together with CP 48 and CP 49 at the consideration of $4,280,000 for the unit and $300,000 for the 2 car parking spaces. 

6.  Since Yiu told Pang to arrange with her solicitor to prepare appropriate documents for Memoran to sign and acknowledge the right over the Adjacent Space, Pang asked Messrs. K. C. Ho & Fong to prepare a licence agreement ("Draft Licence") (B/134-137) on 6 April 1992.  The Draft Licence was passed to Yiu for Memoran to sign.

7.  In June 1992, Yiu told Pang that instead of signing the Draft Licence, Memoran will arrange Parkfair to issue a letter stating that the respondent was allowed to use the Adjacent Space.  Pang agreed.  On 6 July 1992, Pang received a letter from Parkfair ("Permission Letter") (B/171-172) with a plan drawing attached to it stating that:

“柏偉管理有限公司准許雅德苑48號車位業主使用此車位之「鄰近空位」（見附圖），為業主之私人泊車用途” ("the Licence").

8.  The respondent had rented out the residential unit together with the car parking spaces to a tenant from 8 September 1995 to 31 August 1998 and from December 2000, Pang and her family members moved into the unit and had been using the 2 car parking spaces and the Adjacent Space ever since without any limitation or restriction. 

9.  No parking label was issued during the time Parkfair was the manager.  After Sino became the manager, application for parking permits was required.  The respondent had been issued 2 parking permits for CP 48 since the respondent had input the registration number of 2 vehicles (B/173-174) on the application in relation to CP 48 whilst for CP 49, the respondent had input the information of 1 vehicle only.  Security guards stationed at the entrance of the carpark had all along allowed all 3 vehicles to enter the car park.

10.  On 10 July 2014, Sino received a written complaint by email (B/175-177) from an owner that someone had parked a private car in the Adjacent Space.  Pang was asked to remove the vehicle from the Adjacent Space but Pang had provided the management office the Permission Letter claiming to have authorisation from Parkfair to park in the Adjacent Space.

11.  Given the fact that the Permission Letter was dated before the incorporation of the IO who had taken over the management of the Building from Parkfair, the IO did not consider that the respondent still had permission to park in the Adjacent Space.  Sino then issued a letter to the respondent (B/178) stating the permission granted by Parkfair should no longer be valid and asked the respondent to stop parking at the Adjacent Space and the matter will be discussed at the next management committee meeting.  Yet, the respondent had not complied with such request.

12.  At the management committee meeting held on 14 August 2014 ("MC Meeting") (B/179-184), it was decided that since the respondent was still unlawfully occupying the Adjacent Space, letter should be sent to the respondent for an immediate removal of the car from the Adjacent Space.

13.  Solicitor for the IO then issued the first warning letter to the respondent on 11 September 2014 ("1st Warning Letter") (B/185-186) asking the respondent to stop using the Adjacent Space within 7 days, failing which the IO will take legal action without further notice.

14.  Having received no reply from the respondent who carried on using the Adjacent Space, a Vehicle Impounding Warning Notice ("Impounding Notice") was issued to the respondent on 13 October 2014 by placing the same on the vehicle parked at the Adjacent Space.

15.  The respondent had sent a letter to the IO on 21 October 2014 (B/187) maintaining its right to use the Adjacent Space as a result of the Licence and the IO's solicitor had replied to the same on 27 October 2014 (B/188) reiterating that the use of the Adjacent Space by the respondent was in breach of the DMC, the Building Management Ordinance ("BMO") as well as the Government Lease.  Sino impounded the vehicle parked at the Adjacent Space on 7 November 2014 and the vehicle had remained impounded ever since.

16.  After exchange of correspondences between solicitors for the IO and solicitors for the respondent between 14 November 2014 and 8 January 2015, the IO issued these proceedings on 7 May 2015 (B/1-15) seeking for injunctions and orders stopping the respondent from wrongfully converting the common area for its own use in breach of the DMC and the BMO.

17.  In the Notice of Opposition, the respondent alleged that the use of the Adjacent Space was and is lawful by virtue of the Licence and the IO was bound by the Licence.  Alternatively, because of the long period of forbearance or acquiescence by the IO ever since its incorporation, the IO should be estopped from rescinding the Licence.  Furthermore, the respondent also relied on the doctrine of promissory estoppel and proprietary estoppel to say that it is inequitable for the IO and Sino to revoke the Licence.

18.  It is not in dispute that:

a.  the Adjacent Space forms part of the common parts of the Building;

b.  Parkfair had purportedly granted to the respondent the Licence to use the Adjacent Space;

c.  there had not been any resolution passed at any owners' committee or management committee to permit a conversion of the Adjacent Space by the respondent for its own use; and

d.  even if the Licence was found to be valid, does not confer any interest in the land.

19.  In the opening submissions of the IO, the following are stated to be the issues in dispute in this case:

a.  whether the Licence is valid or void?

b.  whether the Licence is revocable?

c.  whether the defence of estoppel by acquiescence is established? and

d.  whether the defence of promissory or proprietary estoppel is established?

Licence Valid or Void?

20.  It is the IO's contention that the Licence is void because:

a.  Memoran did not have any interest in the Adjacent Space so Parkfair, an agent of Memoran, could not grant the Licence;

b.  the Licence was in breach of Clause 28 Part A, Clause 33 Part A and Clause 4 Part B of the 4th Schedule of the DMC; and

c.  the Licence was in breach of s.34I of the BMO.

Memoran's right to the Adjacent Space

21.  Judging from the defence raised by the respondent in the pleadings, the evidence as well as the submissions, there is no argument that Memoran had no right over the common area of the Building.

22.  It is not in dispute that the Adjacent Space is part of the common area of the Building so it must be right that Memoran did not have any proprietory right or interest in the Adjacent Space.  It is the contention of the IO that under such circumstances, Memoran and its agent Chung Tung, could not grant a licence permitting anyone to use the Adjacent Space.

23.  It is trite law that one cannot pass any interest he doesn’t have.  Upon Memoran’s assignment of interest in the Building to the First Purchaser, Memoran’s right over all common areas of the Building vested in all owners and governed by the DMC.  Memoran could no longer exercise any right over the Adjacent Space and could not grant any licence to the respondent to use the same.

24.  As for Parkfair, being the DMC Manager, its power is governed by the DMC as well. There is no suggestion by the respondent that there is any provision in the DMC allowing Parkfair to grant any licence over the use of the Adjacent Space. Neither can Parkfair derive any authority from Memoran which had retained no right over the Adjacent Space as well.

Licence in breach of DMC

25.  It is alleged by the IO that the granting of the Licence by Parkfair is in breach of the following terms of the DMC:

Clause 28 Part A 4^th Schedule

“28. No Owner shall place or permit or suffer any chattel, object, article or thing to be placed in the entrance halls, staircases, landings, or fire exits or otherwise obstruct the same or in any part of the Building not included in the part of which he is entitled to exclusive possession.” (B/114)

Clause 33 Part A 4^th Schedule

“33. No Owner shall use the footpaths, corridors, staircase, entrance halls, lift lobbies and other parts of the Common Areas of the Building of which he is not entitled to exclusive possession for the purpose of placing or storing any dustbins, garbage cans, furniture, machinery, goods or chattels or other things whatsoever thereon or therein.” (B/114-115)

Clause 4 Part B 4^th Schedule

“B. Provisions Applicable to the Owners of Car Parking Spaces Only

...

4. No part of the vehicular access, driveways, vehicular ramps and footpaths (if any) within the Building or the Land shall be obstructed by motor vehicles or any other objects and the Manager shall have the absolute right to remove such obstructions without giving previous notice to the Owner(s) thereof and the costs (if any) thereof shall be recovered from the Owner(s) causing such obstruction.” (B/115)

26.  I agree with the IO that by using the Adjacent Space, a common area for the purpose of parking of a vehicle, is clearly in breach of Clause 28 and 33 Part A 4^th Schedule of the DMC. The respondent had not raised any objection to such a contention made by the IO.

27.  As for the breach of Clause 4 Part B 4^th Schedule, there is no evidence that the Adjacent Space is “vehicular access, driveways, vehicular ramps and footpaths” named in this clause of the DMC. I do not find it to be a breach of the same.

Breach of s.34I of BMO

28.  s.34I of BMO reads:

“(1) No person may –

(a)   convert any part of the common parts of a building to his own use unless such conversion is approved by a resolution of the owners’ committee (if any) ...”

29.  It is the contention of the IO that since there had never been any resolution of the owners’ committee or the management committee to approve the use of the Adjacent Space by the respondent, such use is in breach of s.34I(1)(a) of BMO.

30.  It is never the case of the respondent that its use of the Adjacent Space was as a result of any resolution of the owners’ committee or management committee. Without such a resolution, such use by the respondent must be in breach of s.34I(1)(a) of BMO.

31.  Having considered the above, the only conclusion to draw must be that the Licence granted by Parkfair was invalid and in breach of the relevant terms of the DMC and BMO.

32.  However, even if the Licence granted by Parkfair was valid, one must not lose sight of the fact that the Licence was being granted by Parkfair.  Given the nature of a licence is a personal interest and cannot be assigned and does not run with the land, the Licence granted by Parkfair is not binding upon the IO or Sino, a successor in title of the original grantor unless the circumstances are such as to give rise to an estoppel.

Whether the Licence is Revokable

33.  It is the submission of Mr Wong for the respondent that “(A)t common law a licence was always revocable at will, notwithstanding a contract to the contrary...The rule has, however, been altered owing to the interposition of equity” (Errington v Errington & Woods [1952] 1 KB 290 at 298).  It is stated in the opening submissions of the respondent that “the License is valid and cannot be revoked at will because of the interposition of equity” (§14).

34.  It is the contention of the respondent that it should be protected by equity of promissory or proprietary estoppel or acquiescence and it should be inequitable for the IO to revoke the Licence.

35.  So there is no dispute that the Licence is revocable but the respondent is just arguing that it would be inequitable for the IO to revoke the Licence based on the doctrine of estoppel.  This turns on whether the respondent can establish any defence raised in estoppel.

Promissory Estoppel

36.  Mr Koo for the IO had quoted the case of Luo Xing Juan v Estate of Hui Shui See (2009) 12 HKCFAR 1 in which Hon Ribeiro PJ set out the requirements of promissory estoppel which are (at §55):

“(i) the parties are in a relationship involving enforceable or exercisable rights, duties or powers;

(ii) one party (the promisor), by words or conduct, conveys or is reasonably understood to convey a clear and unequivocal promise or assurance to the other (the promisee) that the promisor will not enforce or exercise some of those rights, duties or powers; and

(iii) the promisee reasonably relies upon that promise and is induced to alter his or her position on the faith of it, so that it would be inequitable or unconscionable for the promisor to act inconsistently with the promise.”

37.  Mr Wong for the respondent had no argument with the legal principles quoted above. It is not in dispute that the IO and the respondent are in a relationship involving enforceable or exercisable rights, duties or powers as governed by the DMC.  It is also not the case of the respondent that the IO or Sino had, by word, given a promise that it will not enforce or exercise its right under the DMC.  The only question arises therefore, is whether sub-para. (ii) and (iii) quoted above is satisfied to establish the defence of promissory estoppel by the conduct of the IO and/or Sino.

38.  Applying the legal requirement of promissory estoppel to the present case, the only evidence that comes from the respondent is that the IO or Sino:

a.  Had allowed 3 parking labels to be issued to the respondent;

b.  Had allowed all 3 cars to enter the carpark; and

c.  Should have notice of the use of the Adjacent Space by the respondent for parking purpose all these years. 

39.  As far as the issuance of 3 parking labels is concerned, it is the evidence of Pang that in the application, it was stated that 2 labels were for CP 48 and 1 for CP 49.  None of the parking labels were being issued in respect of the parking of vehicle at the Adjacent Space.  The fact that one of the owners had indicated that 2 cars may be parked in one of the carpark space owned by the owner and asked for 2 parking labels to facilitate the parking of either vehicle at the carpark owned is not something unusual.  It was never Pang’s evidence that it was made known to the IO or Sino that one of the parking label was being issued for parking at the Adjacent Space.  This court failed to see how can the respondent rely on this fact to establish that the IO or Sino had by conduct, clearly and unequivocally allowed the use of the Adjacent Space or given the promise or assurance that the IO will not enforce the right under the DMC.

40.  For the permission to enter the carpark, it follows from the fact that since the 3 cars of the respondent were issued with a parking label, it would not be surprising for the car park attendant to allow entry of the same.  Yet, the car park attendant would not be concerned as to whether there was a space available for the parking of all 3 vehicles or since the respondent only got 2 car parking space, only 2 cars should be allowed to enter the carpark at a time. The fact that all 3 cars of the respondent were allowed to enter the carpark at the same time is just as a result of the issuance of the parking labels and cannot be taken as a clear and unequivocal conduct allowing the use of the Adjacent Space or giving the promise alleged.

41.  Even if the respondent can establish that the IO did, by conduct, give the promise and the IO was aware of the use of the Adjacent Space by the respondent for the purpose of parking, the respondent failed to show that in reliance on such promise, the respondent was induced to alter its position.  Pang had testified that she had paid $50,000 more for the Licence.  But this is not arising from the words or conduct of the IO or Sino so the extra payment by Pang in exchange for the Licence had nothing to do with anything done or said by the IO or Sino and cannot be taken as an inducement to the respondent.

42.  I found the defence of promissory estoppel is not established.

Proprietary Estoppel or Estoppel by Acqueiscence

43.  Proprietary estoppel, more appropriately described as an estoppel by acquiescence, stemmed from Ramsden v Dyson (1866) LR 1 HL 129 and Willmott v Barber [1880] 15 Ch. D. 96.

44.  In the case of Hollywood Shopping Centre Owners Committee Limited v The Incorporated Owners of Wing Wah Building Mongkok Kowloon, unreported, HCA 1582/2007 (16 August 2010), Mr Recorder Rimsky Yuen SC, having gone through the conflicting decisions including The Incorporated Owners of Hoi Luen Industrial Centre v Ohashi Chemical Industries (Hong Kong) Ltd [1995] 2 HKC 11 and The Incorporated Owners of Hong Kong House v Senfield Ltd, unreported, CACV 117/2003 (12 November 2003), came to the conclusion (at §65) that :

“65. In summary, the position can be stated as follows:

(1) whether or not acquiescence can be set up as a defence to a claim for breach of mutual covenants (whether express or implied by reason of section 34I(2) of the BMO) depends on the nature or type of breach in question;

(2) if the breach of mutual covenants in question is within the power of the incorporated owners to acquiesce, acquiescence can be a valid defence provided all the requisite elements giving rise to acquiescence are established; and

(3) on the other hand, if the breach of mutual covenants in question is beyond the power of the incorporated owners to acquiesce, the defence of acquiescence will not be available since the incorporated owners cannot acquiesce in acts which they in law cannot do”.

45.  In The Incorporated Owners of Freder Centre v Gringo Ltd, unreported, CACV 161/2015 (23 February 2016), the Court of Appeal found that in order to succeed in a defence of acquiescence, it must be shown:

“...firstly, there was on the part of the plaintiff, an assent or lying by in relation to the acts of another person; secondly, in view of the assent or lying by and consequent acts it is unjust in all the circumstances to grant the relief in question: see Spry, Equitable Remedies, 9^th edition, p.56.” (at §26)

46.  In the written submissions filed by the applicant, it is agreed that a breach of Clause 28 and 33 Part A 4^th Schedule of the DMC is one which the IO has authority to acquiesce. But it is argued that a breach under Clause 4 Part B 4^th Schedule is not since the breach concerns not merely a conversion of common parts for an owner’s own use but also an obstruction of vehicular access and/or footpaths. Given my findings above that the IO failed to establish a breach under Clause 4 Part B 4^th Schedule, this argument is no longer relevant. But in case I am wrong in my findings, I agree with the applicant that the breach under Clause 4 Part B 4^th Schedule is different in nature since it is not a breach covered by s.34I of the BMO hence the IO is not empowered to authorise any breach.

47.  It is not in dispute that the respondent had been using the Adjacent Space since its purchase of the units and car parks at the Building and also at the time of incorporation of the IO. The use of the Adjacent Space for parking purpose must be noticeable by anyone walking pass or in the vicinity of CP 48. The IO or Sino, who is responsible for the management of the car park, must be aware of the fact that the Adjacent Space is a common area of the Building and not supposed to be used for parking of any vehicle. Yet, nothing was done until July 2014 when Sino received the complaint.

48.  In Yick Fung Holdings Ltd v Sandwood Ltd [2009] 2 HKLRD 573, it is found that “it is ordinarily sufficient that the plaintiff has been put on suspicion, that is, that he is aware of sufficient matters to raise in his mind a doubt whether an infringement of his rights has taken place” (at §28). Judging from the facts stated at §47 above, the IO and/or Sino must have raised suspicion on seeing a car being parked at the Adjacent Space that such conduct is in breach of the DMC. I am satisfied that the respondent has established the requisite knowledge on the part of the IO who had laid by for all the years till 2014. The first condition expounded in Spry quoted above (at §45) is satisfied.

49.  The next question to consider is whether it is unjust in all the circumstances to grant the relief sought by the IO. There is no evidence adduced by the respondent in support of the fact that it would be unjust to grant the relief. The Representation as well as the payment of money to Memoran had nothing to do with the IO and/or Sino. There is no hardship on the respondent in granting the injunctive relief but to the contrary, the respondent had enjoyed the benefit of using the Adjacent Space for many more years due to the inaction on the part of the IO.

50.  The defence of acquiescence must fail.

Conclusion

51.  It is the finding of this Tribunal that the use of the Adjacent Space by the respondent was in breach of the DMC and the BMO and the respondent failed in all the defences raised. The IO should not be estopped from rescinding the Licence even if it is valid. The respondent should be required to remedy such a breach right away. Given repeated requests, the respondent had still failed to remedy the breach, this Tribunal is satisfied that a mandatory injunction is required to make sure that the respondent will comply with the DMC and BMO.

Order

52.  It is ordered that:

a.  A mandatory injunction that the respondent shall forthwith remove the vehicle from the Adjacent Space at its own costs;

b.  A prohibitory injunction restraining the respondent, whether by itself or by its servants, agents, tenants or licensees from converting and occupying the Adjacent Space for its own use;

c.  Costs order nisi that costs of this application be to the applicant, to be taxed on District Court scale if not agreed, with certificate for counsel. Unless any of the parties applies by summons to vary it, the costs order nisi shall be made absolute upon expiry of 14 days.